Monday, 21 August 2017

NALCOR LOSES $66.9 MILLION IN 6-DAY FAILED HEDGING SCHEME. PUBLIC NOT TOLD.

IntroductionJust when
you thought the incompetence couldn't get any worse at Nalcor, along comes another
scheme to up the ante on deceit and dumb.

This blogger has just learned that Nalcor lost $66.9 million following management's decision to place a bet of $1.82 billion - public money - in the “futures” market.

Nalcor even tries
to put the blame on U.S. President Donald Trump.

To add
insult to injury, Nalcor and the Ball Government did their best to cover up the
failed scheme.

The losses
occurred in May of this year. An eagle-eyed Nalcor watcher, able to parse Nalcor’s
most opaque assertions, brought the contents of the corporation’s last
quarterly financial statement to my attention.How the
money was lost, and the risky financial tool employed, is not an easy subject to
explain. The
“futures” market is an arcane world in which a great deal of expertise is needed to play. Still, most people understand what it means to speculate. And many of them understand the sting of loss. Of course, most people play with their own - not public money.

But the
financial loss Nalcor experienced is so large, and the behaviour of those
involved too circumspect, to allow it to be buried simply because it is
complicated.

Let me
attempt to explain how the $66.9 million disappeared.

Introduction to the “futures” market

Following
approval of the “additional” Federal Loan Guarantee of $2.9 billion for the
estimated $12.7 billion Muskrat Falls project, Nalcor completed the debt
financing in May 2017. Then, by its own admission, the corporation “entered
into bond forwards totalling $1.82 billion on May 12, 2017 to hedge the
Government of Canada (“GOC”) benchmark bond interest rate exposure...” The
hedge period ended May 18, 2017. Why Nalcor felt it needed to engage in such a
high-risk strategy is far from clear.

Nevertheless,
like most things touched by Nalcor, the scheme failed.

A “bond
forward” is a “futures” contract. Futures are commonly traded by hedgers and
speculators to take advantage of price movements in a commodity or a financial
instrument, like a bond. Traders in futures attempt to lock-in the price of a
commodity — today — at a price offered at a specified future date: hence the
term “futures”. Bond traders use the futures market to employ hedging
strategies to protect the value of their bonds against market volatility — as
well as for speculative returns.

A
miscalculation can be very costly if speculators find themselves on the wrong
side of a trade — as Nalcor learned. For example, a miniscule
drop in the interest rate — yield — on a bond can negatively affect the value
of that bond when the parties settle up. Gains/losses on bond futures — or any
futures trade — can occur within hours or even seconds, subject to the vagaries
of the market. Nalcor’s loss of $66.9 million in just six days defines the
risk of a hedging strategy better than any example I might offer.

If you remain unclear about what has occurred, imagine that you have just sold your house and someone tells you that you might make a better return on the proceeds if you put it on a bet. That's what Nalcor did.

The $66.9 million cost to the province is 3.68% of the amount hedged or 2.31% of the total additional amount borrowed under the Federal Loan Guarantee.

$66.9 million. Gone. Lost. In just 6 days!

Who is
minding the shop at Nalcor?

Futures
contracts are so risk-laden, that any decision involving $1.82
billion — or even a fraction of that sum — would require the express approval
of the company’s CEO.

Of course,
Nalcor possesses no bond market expertise, and certainly none in the business
of trading futures. Trading on this scale may be done by international oil
giants like Exxon Mobil — which might also want to hedge against currency risk
— but that is the business of private companies, who employ the expertise. It is not a business for governments.

No
responsible CEO of a government owned corporation — if he understands risk — would gamble with such a huge amount of public money anyway.

Financial
Community Aghast

Aspects of
this failed hedge have raised the eyebrows of some in the financial community
who were consulted by this blogger.

One
expressed surprise that the financial officers at Nalcor were persuaded that
they needed to hedge those bonds for just six days when ‘normal business risk’
might have been employed given the short period of the hedge, the huge amount
of capital at stake, and the risk of major loss.

Another
wondered why such a high-ratio hedge was necessary: $1.82 billion on $2.9
billion. Indeed, the high ratio raises a red flag on the whole transaction. He
suggested, too, that Nalcor should be asked to disclose the fees recorded on
the transaction, and other questions, too, apart the unwarranted risk to public money.

For example...

Did incompetent Nalcor executives take it upon themselves to engage in such a speculation?

Did their inexperience allow them to be mislead by an unwise and avaricious broker or
banker?

Was the $1.1
million which Nalcor said in the quarterly statement could be “recognized
immediately” the amount of the fees received by the broker in the transaction?When did Stan Marshall find out about the speculation and the loss? Did he authorize the transaction?Nalcor attempts to explain loss in private email to one person

Nalcor offers one reason for entering into the hedging strategy, and
another for why it failed.

First,
Nalcor stated in answer to questions from the private citizen who had parsed the financial statement that in the same
week, “as the MF bonds were to be priced, there was also a GOC (Government of
Canada) long bond issuance planned. Historical analysis had shown the rates on
the GOC benchmark bonds often tended to rise over the weekend prior to long
bond issuances, and putting bond forwards in place would help mitigate this
risk.”

The
phraseology is its own proof that Nalcor willingly engaged in the speculation.

Then the Crown Corporation tried to put the blame on Donald Trump.

The Nalcor email reads (with bold added):

“As a result
of Trump/Comey headlines over that weekend and the related financial market
uncertainty it created, the underlying GOC rates actually decreased between May
12 and May 18, resulting in a lower coupon (yield) rate on the bonds and a
hedge payout of $66.9 million.”(Here,
“hedge payout” is Nalcor’s code for the $66.9 million loss it took on the
transaction.)

In other words, market volatility over that
six-day period drove down the coupon rate — blowing through even the low
interest rate which, just a few days earlier, was commanded by the federal
government’s loan guarantee.

Of course,
experienced investors know that ascribing reasons to losses in the bond market,
as in the stock market is, at best, a mug's game. Given all the issues which
influence trading over the course of a minute, an hour or a day, no one ever
really knows why a move occurs.

It is
irrelevant anyway.

Nalcor fails to inform public

Most of us know President Trump is a fool. High risk speculation with public money begs the question: is Stan Marshall a bigger
one?

The issue goes beyond the financial — though it is hard to countenance the loss
of so much money, especially when billions have already been squandered by
Nalcor on the Muskrat Falls project. As always, when public money goes missing there is the issue of accountability.

When $67
million is lost — when 3.68% of the $1.8 billion hedge evaporates in just six
days — one might expect that Nalcor has an obligation to inform the public.

If not the public directly,
the Corporation certainly has a responsibility to inform the Minister of
Finance (then Cathy Bennett). Given the sum lost, the Premier should have gone in front of the microphones.

Evidently the sum wasn't large enough to
warrant his attention. But Cathy Bennett or Siobhan Coady should have been expected to inform
the public if he wasn't up to it.

We don't
know if the decision was taken by a rogue official at Nalcor, or if management
(i.e. CEO Stan Marshall) approved the speculation.

We don't
even know if Nalcor informed the Finance Minister or the Minister of Natural
Resources.

We only know
that neither the Premier nor a Minister told the public. And Stan Marshall
stayed silent, seemingly happy to have the whole affair buried.

Nalcor's response: Obfuscation

Nalcor did its best to obfuscate the loss even when it was obliged, by accounting rules, to make
the disclosure in its quarterly financial statement. The statement was released on August 14, 2017
- making that date the first time the public was given notice that the new monies had been raised under the additional Federal Loan Guarantee.

Indeed, most
of the accounting and investment community in the province would be hard pressed to figure out what Nalcor was reporting given the advisory was sanitized. See the excerpt from page 12 of the Quarterly Report below:

In addition,
the Nalcor PR machine completely omitted reference to the failed hedge and the
$66.9 million loss in its Press Release announcing the “highlights” of Nalcor's second quarter results —though it
found ink for far less important matters!When the press statement got to the $2.9 billion
additional federal loan guarantee, Nalcor mentioned not a word about the egregious loss of public money. The release was simply limited to this
innocuous comment:

Reference to the $66.9 million loss is nowhere to be found!

The first response of the Ball Government ought to have been to send some people, very senior, packing. If he authorized the scheme, the list of persons fired ought to have included CEO Stan Marshall himself. If the decision was made by a rogue executive, by now we should have heard to whom indictments were issued!

Premier Ball and Stan Marshall need to come clean with publicBeing forthright
with the public has long been absent from Nalcor’s —and the Government’s —agenda. With the Premier’s acquiescence, Stan Marshall has done nothing to change
what former CEO Ed Martin entrenched long ago.Wasn't the Nalcor Board given a new Chair? Do the new Board's Members understand their obligations?Nalcor's arrogance and incompetence has been exposed again.

The Ball
Government - and CEO Stan Marshall - owe the public some long overdue accountability.

The media in the US are hammering Trump left, right and centre. It amazes me how little the media here home dismisses the mess of Muskrat Falls. CBC, NTV, VOCM, etc. should be hammering the government daily. People still talk of Churchill Falls and the Quebec deal.....look at this fiasco, we'll pay, our kids will pay and our grandkids will pay. So much for looking out for the future of generations to come. "Thank-You" Danny,Tom,Paul,Cathy,Kathy,Keith,Dwight, Deputy Ministers, Nalcor etc.....disgusting

Nalcor and our successive provincial governments have proven time and time again that they are crooks, lairs, and corrupt, secretive, conniving, non-caring and non-trustworthy bastards! I am sick of the theft, misappropriation and back room deals of both Nalcor executives and Premier Ball and his cronies. Perhaps now we know the valid reason for Bennett's retirement from cabinet. Perhaps she has a conscience and has trouble sleeping, knowing of the skulduggery, wastage, poor decisions and dishonesty happening at the cabinet table, especially when concerning Nalcor.

This should not only be criminally investigated, it needs a public exposure and demand for transparency....NOW! Apart from this blog the public information on the fraud, corruption and now gambling with the house money, your money, carries on in secrecy!

It seems Stans plan for rate mitigation is gambling with the public purse, again without the in house expertise to be competent. No matter it seems. Without the usual public reporting requirements of private corporations there is no risk to the executive of shareholder revolt and job loss. The only shareholder, the NL government, is in on the scam.

Well it is a fine mess you have gotten us into Stan (if I can quote Ollie)!

I wonder how many times Nalcor has gambled in the past. This has the potential to be devastating. Are they so desperate for money that gambling is their only hope, or is it driven by the stupidity of upper management?

Nowhere, else in the world would this happen only in NF. No accountability by any one involved. If I were an official in the Federal government and read this.I would take back the loan guarantee,This is crazy. We are doomed.

This should not come as any great surprise. Nalcor placed a much larger bet with the people of NL's money on the Muskrat Falls Project, and they think they know what they are doing on that. Placing a bet with $1.8 Billion of the NL taxpayers money was small by comparison. Well, at least they are consistent.....losers.

What is 66 million........Well, it could have funded a robust power bill mitigation with incentives to residential customers for energy efficiency , of 1000 dollars each, to 66,000 customers to cut their energy bills by 30 percent. But who wants that approach when we can gamble it away, 12.7 billion and rising........great mitigation for rates Stan! As for Cathy Bennett.......$50,000 for all of cosatal Labrador to offset high food costs (over 60 percent have food shortage issues), and 66 million for this gamble. Idiots and fools running this province ......tell me it isn`t so!Sometimes I think UG will run out of important stories to tell on this blog.......but Nalcor and our government stupidity is the gift that keeps on giving. Is there a single member of the Board of Trade that yet condemns Muskrat........... WA

When governments and / or their agencies are corrupt, and it is very obvious, and the Premier and his cabinet tries to hide the corruption, and will do nothing about the corruption, misappropriation of funds and secretive and conniving decisions, who do we turn to for an investigation of the criminal activity? Surely, there must something built into our provincial or national laws that will protect us from unscrupulous politicians and CEO's who have been appointed by, and are protected by, a government that doesn't give a dam!

There is one thing evident from this is that Nalcor hold pure indifference for the tax payers of the province. They have little reason to hedge currency, and i would expect the majority of their costs are in Canadian dollars. So why do they do it?

This is a valid question. Why does anyone manage 1.8 Billion in taxpayers money outside the normal governance offered by Government?

This is a lot of money. Up through the 1970s this would have been in the order of a annual budget deficit. It seems that the criminals in power now see 66M as pocket money. The blue windows on the confederation tower cost 50M. Spending has been out of control for several years.

Looks OK to me. They wanted to hedge against rising bond yields which would have prevented them from raising the full $2.9B. When yields went down, the hedge went underwater but they were able to raise the full $2.9B at a lower rate which will offset the loss on the hedge. Their position didn't really change over the six days. They just missed the opportunity for a little windfall if they had done nothing.

I expect the guarantee will be called upon, sooner rather than later, but it won't be the fault of the accountants and the bankers.

The people of Newfoundland are still paying the increased Ball gas tax. We are still paying the jumped up HST tax added by Ball.We are paying the highest insurance rates in Canada caused in part by the tax added by Ball.All the while Ball and his cronies are loosing millions in the market.The whole lot of them need to be fired and run off.

All these replys add up to nothing. We need a leader for a revolt. I for one don't know how to fight these increasing electricity rates meself. These gangsters are robbing us blind and we're all left standing up with are pants down and our arse's sore. But yet we keep taking it. Can we collectively agree upon a strategy. I would be open to not paying my bill for three months. If we all do something together we have a chance. If we're all just gonna cry about it we might as well just bend over the oil barrel and take it like the passes we are

Yes, wait 3 months before paying, that too is good if most do it, and burn your bill on their parking lot, if many other do it, and undertake a reduction in electricity use through efficiency and conservation, and follow through on that. But a handful doing that has no effect. Who's afraid of the big bad wolf that has no teeth, and no air to huff and puff. We need to blow the House down, or at least make it shake a bit. We have only got rid of Coffey and Bennett.........there is a lot more hiding out, who are behind this fiasco. There is a song from the seventies: We are on the eve of destruction. Maybe yes , maybe no, but certainly hard , hard times, if we get no honesty or accountability and transparency .

I'm game ,personally I don't think we all have enough guts to have a revolt & abolish the government along with the idiots that run it ,The only people I read about are the natives of Labrador who have the guts courage & strength to fight for food health, add to that ,there lives when communities are being flooded out. I pray for there bravery & they stand stand tall to fight the government who have education & are so stupid selfish & arrogant.All they see is money & to hell with the people of our province who have to suffer. It's no wonder we are called stupid & poor.

I don't mean to be rude, but I question if you are "game" even to protest.........as you avoid stating your name. Those of Labrador are not only named but are often charged with a crime for no good reason, other than to intimidate them and cause them expense and distress. In the USA monuments to General Lee and other racists are coming down, monuments erected as a means to intimidate the black population, well after the civil war . Here, we are intimidated, to even freely express an opinion......such that most on this blog feel uncomfortable to give their name. Putting your name to your opinion is the first step to assert your freedom of speech. Granted , if employed, by government, or otherwise fear them, their is some risk to giving your name........and it says little for our so called freedoms, that the majority on this blog are anonymous. Of course Des Sullivan is never anonymous, but respects those who feel they must be.Winston Adams

Sorry......it's not yet time for a revolt.........as shock rates have not yet happened. There is just nervousness that the time is approaching when it will hit us in the pocket books more. My suggestion of burning power bills as symbolic and intent to reduce electricity use got no support............so we can't even protest not alone revolt. If one acted on reason and facts this project would have never been sanctioned. But emotion dominates reason and facts, and the emotion of shock rates, and worse, is starting to kick in...........but only starting. Andy Wells said he could have resigned in 2012 in protest of MF which he knew would be a disaster, but hey..........he had a life , and a job, and it may have made no difference( the Telegram interview). And those whom he warned .......they have no memory of that (Tom Marshall) , and the meeting he referenced.....no record of that happening.............this an indication of what an inquiry will hear lots of .............don't remember,and no records. And well connected law firms making a killing sitting around listening to all the skullduggery, that their partners may have had a hand in. Rock break scissors, scissors cuts paper, paper covers rock.......is that the way it goes.Well, reason comes from facts and knowledge, emotion comes from feelings, emotion breaks reason. We like to think that as humans we make most decisions from reason, being higher animals with large brains, but I suggest it is emotions that dominate. So MF came from greed, envy of Quebec, known false assumptions, politics, etc......short term profit for companies with connections.....ego (believing one is world class).......... emotional stuff. Revolution too, which is unlikely ( maybe some rants and roars) will be from emotions ...........and no guarantee that things will be better. Confederation........an emotional result from the poverty and hardship from 15 years of dole and Commission govn., caused by prior corruption, and a result of the rural areas suffering from the merchant elite. Emotions my man, is what drives us,..... if we do not get upset, if we are not angry, if our blood don't boil (as John Effort says) then we do nothing, except complain, like me here at the keyboard! No action really. No revolt. We remain, still by far , the Happy province. As I see it. But this blog gives hope that things may change for the better.........maybe.Winston Adams WA

After spending 5 years on Muskrat Falls in a senior position and been exposed to the corruption, I am not surprised. This project along with the corporation providing the oversight is extremely toxic to the financial stability of this province. It goes beyond the project i.e."Dannyville" - take the land and run

The people care, the problem is they are disenfranchised. The feudal control by elites is a reign of terror for anyone who dares challenge the feudal authority, and I speak from experience.

Peaceful, nonviolent Land Protectors are arrested, criminalized for wanting respect apparently conferred from the Supreme Court.

Without transparency and accountability, both noticeably absent in both federal and provincial governments in NL you have a faux democracy that is reduced to a meaningless choice at the polls every four years. In short both your sacrifices and the rights of residents are betrayed.

It will take a few courageous, informed people to step up and finally restore informed transparent decisions. And yes it will be several generations, not one, that will be on their arses with the 57 year funding scam at MF.

The recent excellent piece by David Vardy (Reflections on MF) seems to accept that there is now no stopping this project, but that the operating problems are daunting and likely to destabilize the economy, due to high power rates: that the law of demand and price elasticity has been ignored.....and may result in no power from MF will be used in the province. The anon engineer PENG2 says we need to wait for a forensic audit until the project is complete....lest we not capture the full flaws that exist, as some are yet to emerge. The PENG2 seems to be a civil engineer, and has doubts about the stability of the North Spur. As an electrical engineer, I ask PENG2:1. Do you consider the risk of frequent outages from salt flashovers on the GNP line a serious problem for reliability? 2 Do you, or has Nalcor considered the impact of GICs a problem for reliability on the DC line, and if so , the cost to fix it , if needed for the grid interconnection with NS?3. If a fix is needed for the North Spur ....what is the cost.and have you included it in your estimate?Winston Adams

Praise be to Uncle Gnarley for uncovering this gem. There is no doubt that an operation of this size would be sanctioned by the CEO. If not, there is a governance problem at Nalcor.To be fair, a bond forward is a very common strategy among large Government bond issuers. It is accorded hedge accounting because it reduces the interest rate risk related to a new bond issue. A loss of 60 million dollars on a $1.8 billion long term bond issue is roughly equivalent to a fall in long term Government of Canada (GOC) yields from about 2.2% to 2.0. However, the “loss” on the bond forward is equivalent in present value to the “gain” by issuing at a 2.00% GOC yield on May 17th rather than issuing at 2.2% on May 12th. That being said, I agree with many of Uncle Gnarley’s points. In my experience in the Quebec public sector the largest position we took was a $2 billion bond forward prior to the 1995 referendum. That was a more impactful event than a regular 30 year bond auction. Under normal circumstances, Bond forward strategies totalled $100 - $500 million and were typically designed to smooth out the cost of a bond issue over a period of months. I find it shocking that Nalcor would take such a large position to cover a risk as insignificant as a Government bond auction. Indeed, rates do tend to rise prior to an auction but generally no more than a couple of basis points. Finally, Nalcor had a bigger impact on the market than the Government of Canada since the May 17th auction size was only $1.2 billion. In future, I would suggest choosing an issue date that doesn’t coincide with a Government of Canada 30 year bond auction. After all, there are only two 30 year auctions a year, mid-May and mid-November.

I think the truth is somewhere between the Telegram and Uncle Gnarley. Bond forwards are indeed a useful tool for hedging bond issues used by most large public and private issuers. However, it is very rare to hedge over such a short period. Nalcor claims they were concerned about the market impact of the upcoming Government of Canada (GOC) bond issue of $1.2 billion. Fair enough, so why try to sell an additional $1.8 billion in GOC guaranteed bonds the same week? There are 50 weeks in a year without a GOC 30 year bond issue, why choose to issue in one of only 2 weeks when you have to compete for funds with the federal government? Moreover, the 66 million dollar cash loss has to be financed at Nalcor rates, which are significantly higher than bond yields which are subject to an unconditional GOC guarantee. If you assume that amount will be financed by long term rates, I estimate the loss at about $8 million. The other question relates to how far the market moves against you as you attempt to sell $1.8 billion in the open market. All too often, the investment bankers can see you coming a mile away resulting in an unfavorable market move. The theory is that on the day of the issue, the banks are assumed to take the interest-rate risk on their books, which is why they earn such large commissions. All in all, I would have handled this issue differently but I certainly do not agree with some of the claims of gross incompetence or worse still, legal action.

The standard used by Liberty Consultants is whether the action was prudent. While not gross incompetence, as to the way or timing, I interpret that this was not deemed done in a prudent manner. And the actual cost will be about 66.9 million plus 8 million, so about 75 million.......is this correct' Bernard. And if not prudent, if this went before the PUB, could it be assessed as not a cost to be be borne by the ratepayers.Winston Adams

Good question Winston – It is fair to question the prudence of the transaction. Nevertheless, the use of bond forwards is fairly standard practice and I doubt that people active in financial markets would judge the transaction imprudent. That is my opinion for what it is worth and of course nobody is obliged to agree with me. I would question Nalcor’s judgement regarding certain aspects of the trade. To me the most important point is this: I don’t understand why a borrower would ever issue $1.8 billion in long bonds the same week – I think it was actually scheduled for the same day - as the bi-annual GOC long-bond auction. If Nalcor had not chosen to issue at the same time as the GOC, they would not have felt obliged to hedge the issue. The price sensitivity of these bond hedges is very high, about $3M per basis point on $1.8 billion (so a 1% rise in interest rates would result in a loss of $300 million – not exactly chump change). Given the current level of confidence in Nalcor, Marshall should have perhaps foreseen the potential uproar in the case of a loss on such a large hedge.

Marshall states "He says because they had to raise money and bond rates are constantly fluctuating, they decided to lock in the interest rate for $1.85 billion, or 60 per cent of the $2.9 billion loan, because the rate was attractive on the day. They left the remaining 40 per cent to be determined on the day of the transaction a week later.

Although Marshall says the hedge did result in a higher cost for the loan because interest rates decreased over the course of the week, it was the right decision to make at the time in order to minimize the risks associated with the bond market."

Raising money on the bond markets, hedging and risk management should be done by the department of finance, not crown corporations. How do we know Nalcor even has the competence and experience to be doing this?

We depend on oil revenue to pay for Muskrat and other things. Oil production worsens climate change. Climate change worsens fishery production and management and our economy. Tonight at the Geo Centre, Brett Favaro of the Marine Institute is giving a lecture on THE CARBON CODE; the four horsemen of the ocean apocalypse. He says climate change going on in the ocean is a scary thing for a province that relies on our oceans. Climate change is a `sleeping giant` challenge for the fishing industry. Meanwhile walrus is popping up around Nfld, today a one south of St John`s.........Last week I measures just 39F temperature in Conception Bay, and we had a walrus there in July.

Who is monitoring our oceans...........government is fixated on oil development.

If government were not privy to this transaction it's a clear demonstration of Nalcor running the show. Make no wonder 'world-class' Ed was as incompetent as one could be and still retain his position when so much was going wrong.

If Ball, Bennett or Coady knew, it speaks to their accomplice to the fiasco. Why they feel the need to keep the lid on Danny and Ed's monumental mistake is bewildering. And sadly, the authoring PCs are licking their chops by the Liberals own incompetency.

I tend to believe that the Gov., Banks, Bonding, Brokerage and Insurance Companies are in on the scam. There is just too much cash flow involved to stop the money printing game. Besides, the future taxpayers, ratepayers, workers, public at large are laid open for rape and pillage. Such a game was never about prudent investment in the energy supply business.

It is getting worse every day, risking Public money like this should be enough to show door to the executive team.Plus I believe that we have seen enough of NALCOR, it should be dismantled/ disconnected from Nfld Hydro, which was a well run company until Nalcor flunky came on board.Further Public should DEMAND that "Take or Pay" MuskratFall lagislation should be repealed so the the Consumer of this Province has the right to Purchase Power in open market like rest of canada.If this Govenment is not willing to do so, then we need to change this Government.

Were there monies from this investment gone into the pockets of those who instituted this transaction and the pockets of the financial institution personnel that held the investment for 6 days? A forensic audit needs to be carried out on this and the whole Muskrst Falls Contract cost. I have a feeling there are many multi-millionaires, made from the overall Muskrat Falls project.

It`s interesting that with the Burger Queen, Cathy Bennett gone, our new Finance Minister is considering a sugar tax, and lifting the tax on books. A sugar tax hits fast food businesses , but improved health and should reduce health costs......so a no brainer, used in many places. We are told our borrowing is now down to 2 million a day instead of 7 million a day.......so great success! Still we are in debt 15 billion plus Muskrat debt. The 66.9 million loss by Nalcor in May is actually about 75 million with all considered, over 6 days..so 12.5 million a day by Nalcor, plus the 2 million a day for other government borrowing. So, thanks to Nalcor , some days we hit 14.5 million a day borrowing , thanks to Nalcor. The more MF costs , the more the asset value, I assume is the accounting logic, so this is ignored by Orsborne.. If MF is eventually terminated, if only for lack of power demand on the island,then I guess the asset value gets reduced to near zero. Even if kept operating, when does the 5 billion project costing 15 billion get a mark down in it`s asset value, a debt guaranteed by the ratepayers. Are things as rosy as Minister Orsborne suggests! What is his plan to counter demand reduction form shock power rates.........Fast food is to get a double wammy.....shock power rates for their chip fryers plus a sugar tax. But hey......as a Nalcor director Cathy promoted MF, and kept it going as Finance Minister pumping billions to the this fiasco. Now large energy users get off easy on power Demand Charges, and encourages a waste of electricity. Past time these Demand charges for more than 10 kw loads were jacked up. Lets give the Burger Queen a triple hit, as well as others of the Board of Trade, to help mitigate the residential customer, who uses less than 10 kw.And the extra large houses using 20-40 kw, hit those to with Demand charges. Heck......that would hit Cathy in 4 ways! Someone has to pay for this mess. Just a suggestion Tom.Winston Adams

About Des Sullivan

Uncle Gnarley is written by Des Sullivan, of St. John's.
He is a businessman engaged in real estate, retail and development companies.
A Director of Sullivan Capital Corporation, he is a former Executive Assistant to Premier's Frank D. Moores (1975-1979)and Brian Peckford (1979-1985).
He also served as a Part-Time Board Member on the Canada-Newfoundland Labrador Offshore Petroleum Board (C-NLOPB).
Uncle Gnarley permitted the use of his highly regarded name provided he could have full access to state his own rather unequivocable opinions. (A more detailed Profile of Uncle Gnarley is described in the very first Post entitled "Uncle Gnarley is alive and well" found on this site.
Sullivan is a firm advocate of sound fiscal management by the provincial government and intends to use this Site as a forum for commentary on the major issues of the day. Says Sullivan, "Newfoundland and Labrador inspires debate on a variety of issues, a veritable Muskrat Falls of opinion".
Readers are invited to leave their opinions, too.
Uncle Gnarley will post every Monday, and more often as events warrant.